Vallejo Council seeks to tighten budget in face of growing spending gap

VALLEJO - The Vallejo City Council approved a handful of budget adjustments this week, eyeing a plan to get ahead of a projected $6.61 million spending gap and balance the next year’s budget more carefully. 

Like many cities in California, Vallejo faces a combination of growing costs and less sales and property tax revenue this year. And when city staff recommended mid-year adjustments to the city budget this week, they reported that the city’s revenues are down by nearly $1 million, while proposed spending has gone up $3.12 million. 

The gap is covered by a surplus from last year’s budget for now. But newly elected members of the City Council, who said last month that they’re committed to improving fiscal accountability, agreed at their meeting Tuesday that a course correction is necessary. 

The council voted 5-1, with Vice Mayor Peter Bregenzer opposed and Charles Palmares absent, to use about $1.9 million for some new expenses, including a new $50,000 gun violence reduction program and hiring three firefighters to reduce overtime costs. But otherwise the councilmembers debated how to trim parts of the recommended adjustments more prudently. 

Mayor Andrea Sorce noted that the current budget was largely designed under former City Manager Mike Malone and a different City Council, not current City Manager Andrew Murray.

“We are where we are because decisions were made that were not forward-thinking,” Sorce said. “We owe it to the community that doesn’t want to see us spend without due diligence.”

Murray told the council in his report Tuesday that the city is at a pivotal moment financially, as it faces a decline in consumer spending combined with rising inflation “despite a series of interest rate cuts by the Federal Reserve aimed at balancing economic growth and inflation.” He also requested audit funding, particularly focused on the city’s procurement process, which the council approved.

The first draft of the proposed mid-year changes would have increased expenditures by $2.4 million. Vallejo’s finance director Rekha Nayar said the city’s tax revenue decline includes a $206,000 drop in property tax revenue and a $477,000 drop in sales tax revenue. 

Vallejo has also seen a growth of $200,000 in external legal fees due to investigations, arbitrations and pre-litigation matters, Nayar said. Some of the biggest Public Works cost requests included $325,000 for additional security services at city meetings and $300,000 for a temporary modular dispatch building, which the city has been trying to install for over a year.

The council debated which requests are top priority, particularly given that some were already rejected by the Measure P committee, which oversees spending of a seven-eighth-cent sales tax passed in 2022.

Sorce disapproved of the staff’s first draft for adjusting the budget, noting that the projected deficit has ballooned despite the city having had a $6 million surplus in the past. 

“I can’t authorize new positions … if it’s pushing us into a deficit,” Sorce said. “I think the people elected us to get this into order, and we have not done enough work on this to start authorizing new stuff. We are where we are because the council’s never said, let’s stop and get it right.”

Councilmember Alexander Matias asked the staff to explore less costly ways to handle issues, such as getting the community involved in efforts to clean up sidewalks and graffiti to reduce public works costs. 

“We really need to get creative to make sure we are being nimble - finding creative ways to still provide basic services to our community,” Matias said. “I think the priority is to keep the lights on until July.”

Councilmember Tonia Lediju said that the city can’t cut or avoid paying some of the obligations presented in order to continue operating necessary services. She worried about the ongoing overuse of overtime in the fire department and sought to hire more firefighters, on the condition that next year’s budget be more responsible.

“Of course, we have a very different outlook on what is happening federally, because many things are happening in this [presidential] administration,” Lediju said. “We have a lot of indicators that are telling us that we need to do more.”

One Vallejo resident, Daniel Boone, cautioned the council about making any moves using Measure P funding, since he said in the last committee meeting that the police department’s request for more dispatch workers failed.

“The proposal to Measure P was to approve this money for call takers permanently - and the committee said, ‘we don’t think this is a good idea.’ You’re only hearing one side on this issue,” Boone said. 

Murray told Vallejo Sun that city staff will bring back more information about whether to adopt spending $10 million on street improvements and $3 million on the Mare Island Causeway Bridge, that could be covered under Measure P funds. All other recommended Measure P costs will come back later for adoption, he said.

The city will hold a budget study session on March 22 to create the 2025-26 budget, preceded by a community survey, and followed by a second session April 12. The proposed budget must be published by May 15, to get to a revised budget on June 10.